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f e d a c h n e w s @ a t l . f r b. o r g

News from

VOL. 4, NO. 3, SEPTEMBER 2007

FedACH

The Financial Services logo, "FedACH,"
"FedACH International," "FedACH Risk,"
"FedLine," "FedLine Web," and "FedLine
Advantage" are either registered or unregistered trademarks or service marks of the
Federal Reserve Banks.

DIRECTOAMEXICO.COM

Q&A: BILLIE WADE

2

5

New Site Launched

Nuestro Banco: An Early Success

NEWS KIOSK
DID YOU KNOW?
WHAT’S COMING UP

3
3
4

CUSTOMER IN THE SPOTLIGHT

Century Bank
Customer Support Translates to
Growing ARC Business
n May 1969, Marshall M. Sloane founded
Century Bank in Somerville, Mass. Today,
Century Bank continues to thrive under
the leadership of the Sloane family, maintaining its goal to “provide best in class financial services to our marketplace.” As New
England’s largest family-controlled bank,
Century Bank has grown from a $17 million
bank at the end of its first year to a $1.5 billion bank in 2007. Headquartered in Medford,
Mass., Century Bank has 22 branches in
16 communities throughout Massachusetts.
Century Bank has historically offered its
customers a wide array of ACH products,
including preauthorized deposits and payments, corporate credits and debits, and
Internet-initiated entries.
In 1981, Century Bank introduced its automated lockbox service and is now one of
the largest providers of lockbox services
in the Northeast. Century’s next move was
to add accounts receivable entries (ARC)
functionality to its lockbox image platform.

I

In the fall of 2006, Century Bank began to
convert payments for several billers to ACH
transactions. While Century Bank’s volume
associated with each transaction type has
grown at a healthy pace, the most notable
volume growth has clearly been in the bank’s
ARC origination.

Sales and Operations
Working Together
According to Janice A. Brandano, who has
been with the bank for 34 years and is now
senior vice president with responsibility for
Century Bank’s lockbox and items processing operations, a key factor contributing to
the ever-increasing ACH origination business
is that the bank’s sales force is heavily supported by ACH operations staff. Brandano
describes the operations staff as a “significant source of support in the sales of ACH
products.” When promoting ACH, the sales
team is the initial point of contact, and the
operations team helps by explaining the
News from FedACH | 1

benefits and provides training and education.
The deal is generally closed through this type
of collaborative effort. Century Bank also uses
statement stuffers and in-house promotional
materials to promote its ACH services. These
actions, combined with the bank’s corporate
sales efforts, have proven successful in growing Century Bank’s overall ACH volume.
Shifting attention to Century Bank’s ARC
origination business, the volume of which
may surpass its preauthorized credit and
debit origination volume in 2007, Brandano
explained that converting check payments to
ACH transactions played a key role in the
bank’s ability to reduce check clearing costs.
When considering the escalating costs of
clearing paper checks and the value of the
ACH network, Century Bank recognized that
ARC represented a payments processing functionality of which the bank should take full
advantage. Since first implementing check
conversion in late 2006, Century Bank has
continued to promote the benefits of ARC to

CUSTOMER IN THE SPOTLIGHT
its customers in what Brandano describes as
“an aggressive campaign to get as many of our
lockbox customers as possible converted.”

ACH operations, the bank conducts training
on at least a quarterly basis. Training sessions include ACH rules changes as well as
topics specific to the bank’s ACH operations.

Customer Support is Key
Integral to this campaign is the support
that Century Bank provides its corporate
customers throughout the process. Among
the tools available to customers is a manual
outlining the responsibilities of both the
biller/originator and the bank, a simplified
method to handle opt-outs, and sample disclosure statements for communicating to
consumer customers. Brandano expressed
the bank’s view that “the success of the program was predicated on how easy we made it
for our customers to move ahead with checkto-ACH conversion.” By educating its customers and providing helpful tools, Century
Bank has made the process easier, and the
volume growth confirms the effectiveness of
this approach.

Training Reaches All Staff
Because of the integral role that ACH operations staff plays at Century Bank, internal
training is a top priority. As explained by
William Gambon, who has been with the bank
for 19 years and is senior vice president over
Century Bank’s deposit operations, including

“The success of the program was predicated on
how easy we made it for
our customers to move
ahead with check-to-ACH
conversion.”

Annually, the bank conducts training for
employees in all areas of electronic services, including ACH. Brandano explained
that employees working in the lockbox area
are trained on all aspects of ACH.
Training ensures that customer service
staff is equipped to handle incoming calls for
explanation of any ACH transaction type. As
a community bank with educated associates,
all of whom are focused on delivering the
highest quality service to the bank’s customers, Century Bank has been successful at
retaining and growing its customer base.

To compete with larger financial institutions,
the bank’s leadership believes that it must
offer all the products and services and maintain a higher level of customer satisfaction.
As Brandano put it, “customer service is paramount. Our staff is dedicated to delighting
our customers.”
Looking ahead, Brandano expects that
Century Bank’s ACH origination volume will
continue to grow along with overall acceptance of ACH transactions. Brandano predicts that ACH will continue to be a growing
component of Century Bank’s payments business. Citing that the question will remain
“What is the lowest cost to clear a check?”
Brandano asserted that the outcome may be
a blend of clearing methods, one of which
will undoubtedly be ACH.
Century Bank—recognized earlier this
year for its success in “greening” its headquarters and some branch offices—agrees
that the prospect of promoting ARC as a
green payment method may be catching
on. After all, electronic payments are naturally green, and as Brandano concluded, “if
any customers are on the fence about implementing check conversion, this might be
just what it takes to persuade them to take
that step.”

DirectoaMexico.com Now Available
In mid-September, a new Web site was
launched to support the Directo a México
service. Available in both English and Spanish,
directoamexico.com provides consumers with
information about how the service works and
lists the benefits of Directo a México for both
senders and receivers. The new site features
a convenient tool that helps consumers find
the nearest U.S. financial institution offering Directo a México.
Site visitors are able to see the foreign
exchange rate applied by the service on a
given day as well as find answers to frequently
asked questions. Consumers can also access
News from FedACH | 2

step-by-step instructions for making a crossborder payment to Mexico.
As a supplement to information already
available on frbservices.org, financial institutions can find helpful information tailored
to their needs, including tips on how to begin
offering Directo a México. U.S. financial institutions can also view examples of marketing
materials designed to assist them in promoting
the service.

NEWS KIOSK

FedACH SALES SPECIALISTS
Each of these regional account executives is an ACH resource expert
and is dedicated to helping customers find just the right FedACH solution.
We encourage you to contact the sales specialist for your district.

On August 14, 2007, NACHA’s voting members approved
·a new
SEC code—IAT—for use with all international
ACH transactions beginning March 20, 2009. The new
SEC code will replace the two SEC codes—CBR and
PBR—currently used for international ACH transactions. The rule change will also require that IAT payments include specific data defined by the Bank Secrecy
Act. These changes will provide for easier identification
of international transactions while assisting RDFIs in
their efforts to comply with OFAC-sanctioned guidance.
Following the implementation of the new rule, FedACH
will process ACH credits coming from countries for
which only outbound payments are currently processed.
Services will soon include a new risk manage·mentFedACH
service, and this time around, RDFIs interested in
managing their ACH receipt risk are the beneficiaries.
The RDFI File Alert Service will be provided, within the
Fed’s suite of ACH risk services, to RDFIs with access to
FedACH Information Services. This service will allow an
RDFI to set debit and credit thresholds (dollar amount,
addenda/item count, or both) for FedACH output files.
When a FedACH output file destined for an RDFI exceeds
a defined threshold, an e-mail alert will be sent to the
RDFI’s designated points of contact. Look for more information to come on this powerful new risk management
service from FedACH Services.
Alabama ACH Association (ALACHA) welcomed
·its The
new executive director, Gai Craig, on September 4,
2007. With more than 24 years of banking experience
and a former membership on ALACHA’s board, she
brings with her a wealth of knowledge. Please join us in
wishing Gai Craig well in her new role.

Atlanta

Nedelka Bell, AAP

305.471.6472

Boston

Jean Fisher, AAP

617.973.3218

Chicago

Mark Taylor

312.322.8449

Cleveland/St. Louis

Susan Bivens, AAP

901.579.2405

Dallas

Matt Davies, AAP

214.922.5259

Kansas City

Joni Hopkins, AAP

620.221.2712

Minneapolis

Marilyn Coleman, AAP

612.204.6964

New York

Thomas Goodman

201.531.3637

Philadelphia

Carol Chartrand, AAP

215.574.3414

Richmond

Della Tate, CTP

410.576.3384

San Francisco

Dorothy Williams, AAP

801.322.7948

DID YOU KNOW?
If your institution plans to enroll in FedACH International® Services—
or maybe is already enrolled—there is a fast and easy way to potentially
increase your international ACH transaction volume. Included in the promotional kits available to institutions signed up for either Canada ConnectionSM or Directo a MéxicoSM is an authorization form for the FedACH
International Services Participant Registry. By completing and submitting
this two-page form to the Federal Reserve Banks, your institution will be
added to the ever-growing list of FedACH International participants. The
benefits associated with submitting the participant registry form include
these marketplace advantages:
institution, including any branches identified on the form, will
· Your
be part of a database available to the public indicating that you offer
FedACH International Services, and
database serves as free marketing for your institution and may
· The
help drive new customers to your institution.
To sign up for FedACH International Services, contact your local FedACH
sales specialist. When you do sign up, don’t forget to fill out and submit the
participant registry form.

News from FedACH | 3

WHAT’S COMING UP

OCTOBER 2007

NOVEMBER 2007

Navigating Payments 2007
October 11–12, 2007
Brooklyn Park, MN
www.umacha.org

Payments Insights 2007
Charting the Payments Landscape
November 5–6, 2007
Burlington, MA
www.neach.org

Payments Summit
October 23–24, 2007
Columbus, OH
www.paymentscentral.org

The Institute of International Payments
November 27–29, 2007 Atlanta, GA
www.nacha.org

Mid-America Payments Conference 2007
Making Payment Systems Understandable
October 29–30, 2007
Overland Park, KS
www.mpx.org

TechMecca® 2007
November 28–29, 2007
www.swacha.org

Las Vegas, NV

ACH RISK PRIMER
Courtesy of NACHA’s Risk Management Advisory Group, we are providing you with this
quick reference guide to ACH Risk.
Traditional Types of Risk
Compliance Risk– occurs when a party to a
transaction fails to comply, either knowingly
or inadvertently, with ACH Network rules
and policies, regulations, and applicable
U.S. and state law.
Credit Risk– occurs when a party to a transaction cannot provide the necessary funds,
as contracted, in order for settlement to
occur in the originator’s account at the
ODFI. There is credit risk for both debit and
credit origination, but financial institutions
assume a certain degree of additional risk
when they originate ACH debits due to the
consumer’s right of adjustment under the
ACH Rules and Regulation E.
Fraud Risk– occurs when a payment transaction will be initiated or altered in an
attempt to misdirect or misappropriate
funds by any party to the transactions (i.e.,
employees, interlopers, and organizations)
with fraudulent intent.
Operational Risk– occurs when a transaction is altered or delayed due to an

unintentional error. Examples of operational
risk include clerical error or hardware and/or
software failures.
Systemic Risk– occurs when the inability
of one funds transfer system participant
to settle its commitments will cause other
participants to be unable to settle their
commitments.

Ancillary Risks
(i.e., consequences or by-products of not
managing Compliance, Credit, Fraud, Operational, and/or Systemic Risks)
Reputation Risk– occurs when a customer’s
confidence in a financial institution or the
Network will be diminished.
Cross-Channel Risk– occurs when the
movement of fraudulent or illegal payment
transactions from one payments channel
to another (e.g., check payments to ACH) is
facilitated by inconsistent risk management
News from FedACH | 4

practices and the lack of information sharing across payments channels about fraud.
Direct Access– a situation in which an originator or a third party (either its third
party service provider or an originator’s
third party sender) transmits ACH files
[transactions] directly to an ACH Operator
using a financial institution’s routing and
transit number and settlement account.

Question and Answer
Nuestro Banco: An Early Success
When did Citizens Union Bank first offer international ACH services? What circumstances led to
the decision to do so? We first offered Directo a
México to our customers in 2005. Citizens had concentrated attention on its Hispanic customers since
2002, and it was a natural fit for us to take advantage
of Directo a México. We were well aware that the process of transferring money presented the Hispanic
population with real challenges. Directo a México
provided us with a valuable marketing tool when
working with our Hispanic customers.
Billie W. Wade, president
and chief executive officer
of Citizens Union Bank in
Shelbyville, Ky., talked with
us recently about the August
2007 grand opening of the
bank’s first bilingual branch.
Citizens Union Bank has
a long history of being a
hometown bank, maintaining its focus on offering
“Convenient, Understandable Banking” to its customers. After talking with
Wade, it was clear that
the opening of a bilingual
branch intended to serve
Latino customers was a
natural step for Citizens
Union Bank. With 19 years’
experience as a certified
public accountant, Wade
joined Citizens Union Bank
in 1991, and he has seen
the bank’s assets grow from
$150 million in 1991 to
$580 million today.

In August 2007, Citizens Union Bank opened a
new branch—Nuestro Banco— specifically for
Latino customers. Nuestro Banco (translation: Our
Bank) is the name assigned to our newest branch.
Although we were perceived as doing well serving
the Latino population in Louisville and surrounding
metro markets, we heard that the traditional banking
environment could be intimidating. We recognized
that we could do more to enhance the banking experience. One step we took was to talk with our bilingual staff members to get their input on the design
and overall philosophy of the new branch. We also
visited all-Hispanic branches opened by other financial institutions to learn from their experiences.
The eventual outcome was a branch that doesn’t
resemble a typical branch banking office. Nuestro
Banco is located in a shopping center in the midst
of a Hispanic community within Louisville. Once
inside the branch, the usual teller windows and
accompanying lines are largely absent. In their place
are areas where customers can sit down and talk
with a Spanish-speaking banker in a comfortable,
casual, and relaxed setting. All of this is surrounded
by brightly colored furnishings, and there is even an
area in which children are invited to play while their
parents take care of their banking needs.
How does Citizens Union Bank promote Directo
a México? We have signage in all our branches and
information on the Spanish version of our Web site.
Our business development officers, who concentrate
their efforts on the Hispanic population, pass out
flyers at a variety of community events and meetings.
Citizens Union Bank even sponsored the creation of
News from FedACH | 5

a Hispanic division within the Louisville Chamber of
Commerce, and that has been an effective way to
reach the business community. We have also been
successful in promoting Directo a México to the
Hispanic congregation of a neighborhood church.
How would you describe the August 2007 grand
opening of Nuestro Banco? It was a bigger success
than we could have hoped for. In addition to customers, both existing and new, the event was
attended by the mayor of Louisville, other government officials, and financial industry leaders. We
attribute the impressive turnout to personal invitations and publicity following the “soft” opening three
weeks prior. This wasn’t a typical bank branch opening, and we didn’t want it to feel that way, either.
The event was catered by a local Mexican restaurant, complete with pureed jalapenos that, to one of
our account executives, looked like guacamole but
left him in dire need of water. While that may have
provided many of us with a memorable moment, the
most tangible measure of success would probably
have to be the 56 new accounts opened within the
first month at Nuestro Banco. Citizens Union Bank
normally requires a minimum deposit of $50 to open
an account, but that minimum was dropped to just
$25 to encourage a higher number of account openings at Nuestro Banco.
What feedback have you received from customers?
Our customers have reacted favorably to Directo a
México and to Nuestro Banco. Directo a México
enables them to send money to Mexico for a much
lower price than they previously paid for other remittance options. We have also heard from our branch
employees that they, along with customers, are
enjoying Nuestro Banco and the casual, unconventional banking environment that it provides. The
branch stays busy throughout the day, and our
employees have expressed their amazement at the
number of customers they see. Much of the higherthan-expected customer traffic has likely been
generated by word of mouth within the Hispanic
community. Simply put, our customers are finding
Nuestro Banco to be a place where they feel comfortable and trusting of the staff.

2007 FedACH SERVICES FEE SCHEDULE 1

CHANGES COMING TO FedEDI IN 2008

Origination

Between now and the end of 2007, preselected pilot customers
are working with FedACH Services to prepare for the release of
FedEDI Plus. In January 2008, FedACH Services customers will be
able to access FedEDI Plus through FedACH Information Services
via the FedLine Web and FedLine Advantage access solutions. Customers will no longer need to request and install software, nor will
they have to import payment or supporting files because all data
will be housed in FedACH Information Services. The service
enhancements associated with FedEDI Plus will enable subscribing
customers to:

·
reports in the format that is most convenient (for exam· receive
ple, choose from TXT, PDF, and HTML file formats),
and provide optional, automated e-mail notifications to
· receive
business customers for secure report retrieval, and
reports online for various date ranges and customer
· request
accounts with a new “on demand” feature.
request that reports be automatically generated on a fixed
schedule without repeatedly entering a request,

For additional information on FedEDI Plus, contact your
FedACH sales specialist.

RETURN SERVICE REQUESTED

$0.0030

Items in large files (> 2,500 items)

$0.0025

Receipt Items

$0.0025

Addenda Records

$0.0010

Input File Processing

$2.50 / file

Web-derived Returns / NOCs

$.30

FedPhone-derived Returns / NOCs

$2.00

Facsimile Exception Returns/NOCs

$15.00

Information Extract File Subscription

$20.00 / RTN / Month

Account Servicing

$25.00 / RTN / Month

FedACH Settlement

$20.00 / RTN / Month

FedACH Risk Origination Monitoring Service
Subscription Fee

$20.00 / RTN / Month

Monitoring Criteria

$15.00 / Criterion / Month

Batch Monitoring

$.0025

FedACH International Services
Item Originated to:

Canada

$0.0390

Mexico

$0.67

Austria, Germany, Netherlands,
Switzerland, United Kingdom

$2.00

Return Received from:

1

FEDERAL RESERVE
RETAIL PAYMENTS OFFICE
1000 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30309-4470

Items in small files (< 2,500 items)

Canada

$0.77 (surcharge)

Mexico

$0.69 (surcharge)

Austria, Netherlands, Switzerland

$5.00 (surcharge)

Germany, United Kingdom

$8.00 (surcharge)

Same day Recall of Item
– Canada Service

$4.00 /$7.00

Item Trace - Canada Service

$3.50 / $5.00

Item Trace - Mexico Service

$11.50

Refer to www.frbservices.org for additional details

PRESORTED
FIRST CLASS
U.S. POSTAGE
PAID
ATLANTA, GA
PERMIT NO. 292